With the holidays almost upon us, it’s time to consider the ultimate gift, that is, preparing for your early 2017 tax meeting.  We thought we’d touch on some basic best practices before you call us to schedule your tax appointment.

Here’s five quick tips and thoughts for year-end tax ideas:

  1. Investment Gains and Losses: If you’ve sold stocks, mutual funds, etc for a gain, look to trim some of your portfolio’s losers to offset the capital gain tax. If you have more losses than gains on your sales, then you are able to claim up to $3,000 in investment losses for the year and the remainder can be carried over for future years.
  2. Health Savings Account:  If you have a health plan that qualifies as a ‘High Deductible Health Plan,’ you are then allowed to contribute to a Health Savings Account. These contributions are tax-deferred and distribution are tax-free if use for qualified medical costs. The limit for a single person is $3,350 for 2016 and married couples are allowed to contribute $6,750. The two interesting aspects of the Health Savings Accounts are that there are no income limitations and at age 65, the unused portion can be rolled over to an IRA if wanted.
  3. 501c3 Charitable Contributions: If you have a non-profit that is near and dear to you, then year-end is the most popular time for charitable contributions. Make sure your charity is deemed a legitimate non-profit with a 501c3 under the IRS tax code in order for your donation to be tax-deductible.
  4. Donating Clothing and Goods: Find out if the organization you are donating clothing and/or furniture is a charitable organization that can provide you a receipt that totals the value of the goods you donated.
  5. Use up those Flexible Spending Accounts:  Make sure you understand the difference between a Health Savings Account and a Flexible Spending Account. Your Flexible Spending Account must be used up every year, save for $500 they allow to fold over to the next year (subject to employer’s plan qualifications). Find out what acceptable items/services you can purchase before year end to help make use of all of your Flexible Spending Account funds.

Lastly, if you have had a special situation during this tax year, call Key City to discuss sooner rather than later. Many items that are of a financial nature (ex: sale of a home or business) can be addressed with strategies to minimize the tax consequences. Addressing these issues immediately, or in the same tax year at least, will maximize your options to help minimize your taxes.

About the author